There is no doubt that trading on the stock exchange can be immensely profitable, and it has created many millionaires. Having said that, there will always be losers, and you have to be careful that you do not become one of them. The key is knowledge, and how you use it.
The problem with most stock market books is that you need a large degree of understanding before you can get started. Reading a company's annual report well can take you years to learn to do properly.
There are hundreds of books on technical indicators and complex trading methods on the market. There are dozens of conflicting ways to trade and make money on the stock markets.
What's really needed is an initiation into the stock market that can immediately be actioned, and one that sends people up the learning curve quickly, without costing the earth.
What happens to people who want to trade the stock markets, but don't have an idea about any of these things? Most go into day trading and try to make a little bit of money here and there, thinking that if they only have very short term position, usually intra-day, then they can't lose too much money. However, the simple fact is that within the first year of trading, over 90% of day traders lose all of their money.
Sometimes, people go the other way and buy familiar stocks, like auto makers, banks and large household names. The results here are often little better, especially right now, in the middle of the credit crunch. Buying and holding for security in the stock market without a huge level of knowledge is almost as risky as day trading. Buying Ford or GM would have returned 0% return in over 25 years (-65% or more in real terms) ...and they don't come much bigger or well known than that!
There is a third way that doesn't require a huge amount of knowledge of a company's accounts and a massive amount of knowledge about technical indicators. It's called momentum trading. Basically, it means taking a position for a few months to a few years. This way, the two risky sides of the timeline are taken out, and you can gain from the lion's share of the price moves that good stocks always make.
There is still an element of risk involved, but this risk can be largely removed from your trading. Sound principles of money management, combined with methodical research, stock picking and stock selling are all that are required.
Anyone can trade in a way that is profitable and risk controlled. The best way to accumulate capital to provide the income needed to be rich quickly is to speculate in property or stocks in an intelligent and risk controlled way.
Far more people get rich using these routes than with any other method. The trick is in getting the right information from the right source.
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